"It was Friday August 15 2008 and a senior official at the US Federal Reserve in Washington wrestled with a thorny problem: he wanted to know what was happening inside Lehman Brothers but was afraid to ask.
Pat Parkinson, now the Fed's top bank supervisor, was trying to find out which companies had derivatives contracts with Lehman as he gauged how severe the impact would be if the investment bank collapsed. But colleagues in New York told him that just requesting the data would be 'a huge negative signal' for the bank's prospects and they were 'very reluctant' to do anything that might 'spook the market'. /.../
'Everyone's going, ''what do I hold that is Lehman?'', says Mike Atkin, head of the Enterprise Data Management Council, a group of banks, information technology companies and regulators. 'Wait a minute... what is Lehman? Lehman isn't one entity - it's 10 000 entities. We don't know what our exposure is because we're not sure what Lehman is.'"

Swaps
"US regulators are finalising new rules for the previously privately traded swaps markets. The rules will mandate clearing for many swaps, as well as set capital, collateral, trading and reporting requirements, all aimed at reducing risks and improving transparency.
The Commodity Futures Trading Commission's jurisdiction could extend to overseas swap activities if they have an impact on US commerce.
European regulations are not yet as detailed - or as onerous - as the rules due to be finalised by July in the US."
Gregory Meyer och Aline van Duyn, "US regulators urged to spare overseas units from swaps rules", FT 17 mars 2011

"In his frequent testimony before Congress and in the nine quarterly reports and 13 audits his office has published, Mr. Barofsky has served taxpayers well by speaking truth to the powers at the Treasury.
This has often put him at odds with the Treasury officials whose work he is charged with overseeing — a natural consequence for any watchdog with teeth. Using facts, figures and extensive interviews, Mr. Barofsky has questioned the effectiveness of the administration’s loan modification program and the Treasury’s initial refusal to require institutions that received taxpayer-financed bailouts to account for their use of TARP funds.
He has also criticized the bank-friendly terms of the rescue in 2008 of the American International Group; that deal was led by Timothy F. Geithner, the Treasury secretary, who at the time was president of the Federal Reserve Bank of New York. Unlike others in Washington, Mr. Barofsky has also spoken passionately about the continuing problems posed by too-big-to-fail financial institutions.
In addition to his candor, Mr. Barofsky delivered a solid prosecutorial record."

"The largest banks and financial firms will submit blueprints for their dismantling in the event of failure to U.S. regulators by the middle of next year, with later deadlines for smaller institutions.
Federal Deposit Insurance Corp board members voted 3-0 on Tuesday to finalize the living will rule required by the 2010 Dodd-Frank financial oversight law. The rule also has to be approved by the Federal Reserve, which is expected to do so within days.
Bank holding companies and other large financial firms with more than $250 billion in non-bank assets will have to file initial plans by July 1, 2012.
Firms with between $100 billion and $250 billion in non-bank assets will have until July 1, 2013, 2to file plans. All other companies covered by the rule will have until Dec. 31, 2013."

Cochrane om kapitalration
Nyliberale Chicago-ekonomen John H. Cochrane skriver gästledare i WSJ om att också Basel III:s krav på 7 procent kapitalratio är alldeles för lågt. "As long as governments subsidize debt and will bail out the creditors of any large financial institution, we need large capital buffers to protect the taxpayer and the financial system. Even the Fed's 10% is timid. We should demand much more."
Cochrane, "The More Bank Capital, the Safer the Bank", WSJ 18 juli 2011

Global systemic important financial institutions
"Twenty-eight global banks would face capital surcharges and would have to write 'living wills' - plans that would enable regulators to shut them down in a crisis - by the end of next year, under designs put forward by global regulators on Tuesday.
The Financial Stability Board, made up by regulators, central banks and international organisations, has been charged with revamping the global financial system to prevent a repeat of the 2008 wave of taxpayer-funded banking rescues. It will send a final version of its proposals to the Group of 20 large economies for their endorsement at their next meeting, in November.
In twin consultation documents, the FSB and the Basel Commitee on Banking offered the first detailed look at how they propose 'global systemically important financial institutions', or G-sifis, both more resilient and easier to wind down.
The G-sifi banks would face an equity surcharge, ranging from 1-2.5 per cent of their assets, adjusted for risk, on top of the Basel III global minimum of 7 per cent core tier one capital."
Systemet ska implementeras 2014.
Brooke Masters, "FSB proposes capital surcharges for banks", FT 20 juli

"'I see certain movements, I hear certain threats to leave Europe,' replies the commissioner. 'I have two reactions. The first is to say that those who leave - or threaten to leave - for a short-term profit... are making a bad calculation. But the other response... is to continue to work harder at the global framework. The G20 must be the road map for the entire world."

"Proposals for Basel III are now under review by Europe’s legislative bodies. It is vital that the European Union analyses them closely.

The Capital Requirements Directive IV, which implements Basel III in EU law, is the most substantial of all the post-crisis regulatory measures entertained to date. But it urgently needs further streamlining and tightening.

Five key areas require specific attention: 1) the maximum harmonisation or uniform capital rule which encourages one-size-fits-all capital buffers for banks; 2) the limited role of the leverage ratio designed to limit risk-taking at banks; 3) the maintenance of the risk-free nature of sovereign exposures; 4) the continued reliance on credit ratings, despite all the criticism of their role, to determine the levels of capital required; and 5) the maintenance of a positive bias towards real estate exposures. /.../"

"New SDR issues could be introduced in times of declines in private capital flows or large falls of global commodity prices. These would increase the ability of current account deficit countries, such as Pakistan or Egypt, if they were hit by an external shock.
In practical terms the G20 should encourage the IMF to issue a significant amount of new SDRs during the next three years, up to a value of $390bn a year. Such a move would have a number of benefits. It would reduce the problem of recessionary bias, by allowing central banks to exchange SDRs for hard currency, such as dollars or euros, and use it to finance higher imports. It would partially replace countries' need to accumulate reserves. Given its relatively small scale, more SDRs would also help to sustain and accelerate recovery of the world economy, without leading to inflationary pressures. And by reducing the need for countries to set aside foreign exchange reserves, it would also facilitate some reduction in global imbalances."

"Three-and-a-half years later we’re facing an alphabet soup bowl of proposals and regulation: G20 Accords, Dodd-Frank, the Volcker Rule, Basel III, the Mifid review, Emir and others. While critics say it’s too little, too late, this legislative tsunami will transform banking more than any financial rules since the Great Depression.

This will force banks to change the way they deploy capital. Increasing banks’ reserves increases the cost of bank capital. This, in combination with pushing derivatives (and in Europe most products) towards central clearing and trading on exchanges or swap execution facilities, will reduce the size of firms’ trading books and shift the market towards an agency model, where banks execute orders on a client’s behalf and do not hold products in inventory for clients.

The Volcker Rule, the US initiative to ban proprietary trading, will push banks towards reducing risk and shifting their principal risk-based profit model to one based more on transaction fees. As principal risk is replaced by fees, bonuses and subsequently salaries will be cut, pushing higher-paid individuals out.

So what? Who cares if banks can’t take trading risk and banker fat cats turn tail and run? Aren’t these good things? Maybe yes, maybe no. Either way, we’ll all be affected."